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Bank capital review background papers released
Date: 25 January 2019
Bank capital review background papers released, consultation extended
The Reserve Bank has released background papers relating to its ongoing review of the minimum amount of capital that banks must hold.
The Reserve Bank is currently consulting on a proposal to raise the amount of capital that banks must hold. This change would make bank failures less likely and ensure that bank shareholders have a meaningful stake in their bank, so that they absorb a greater share of losses if their bank fails.
The background papers relate to the consultation
currently underway, and the wider review of bank capital rules which has
been underway since 2016. The papers were prepared for
internal discussions by Reserve Bank staff in the
development of the proposals.
They include the extensive
research, modelling and analysis that has gone into the
review. Additional technical papers on some specific topics,
such as the cost of capital, will also be released as the
review continues.
Deputy Governor and General Manager of Financial Stability Geoff Bascand says the consultation is significant as the proposal could see banks’ capital levels increase materially.
“While we’ve published our proposed views in the consultation document, these are not final, and we want to ensure all interested parties have time to adequately consider the proposals and provide feedback,” Mr Bascand said.
The Reserve Bank has extended the timeframe for consultation by just over a month, in response to feedback from stakeholders.
The extended deadline for feedback on the proposals is 3 May 2019, and the Reserve Bank expects to publish final decisions in the third quarter of 2019.
The Reserve Bank is proposing a five-year transition period for banks to meet any new requirements that it introduces.
More
information:
• Background papers
• Consultation paper: How much capital is
enough?
• Non-technical summary: How much capital is
enough?
• Video: What is capital adequacy?
•
Video: Governor Adrian Orr describes
importance of bank
capital
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